Project Finance SoE Q's Flashcards
What is the purpose of post contract cost reporting?
Provide an overview of the client’s currant financial commitment
Inform the client of the likely outturn cost
Give the client an understanding of potential savings or additional monies required
How are risks identified?
Following a risk analysis as part of a risk workshop.
A risk analyses is used to identify potential risks, identifying the likelihood vs impact to give an overall severity rating.
What is a lump sum contract?
- Amount advised by the contractor to complete the works for a set amount.
What is a cost reimbursable contract?
- Employer pays the contractor for actual costs incurred plus % for overheads and profit.
What examples of bespoke cost reporting have you used?
- Mitchells and Butler, own financial statement templates are used.
What are the importance of change control procedures?
- All relevant parties are notified
- Change is properly assessed in terms of cost, time, quality
- Formally records changes once agreed
Can you elaborate on what is included within the Cost Reporting guidance note?
The cost reporting guidance note looks at a few differing elements. Looking at the different types of cost reports, including project, programme and detailed cost reports.
It further looks at costs that affect the construction cost i.e. fixed, and variable, including prov sums, prime cost sums, dayworks. As well as variations, which includes contract instructions, anticipated variations, loss and expense, fluctuations and risk allowances. Reporting of costs should be monthly to fall in line with valuations, but this is dependent on client requirements and therefore may be more/less.
What are the different types of provisional sum?
Defined – Allowances within the contractors cost for prelims and OH&P
Undefined – No allowance within the contractors cost for prelims and OH&P, may be due additional time and money in respect of EoT and loss and expense.
What is a prime cost sum?
A sum that the client provides for works yet to be fully defined and exclude a contractor mark-up.
How are provisional sums dealt with at final account?
The value of the provisional sum is omitted and added back in as a priced variation.
How do you report on the provisional sum costs during a project?
The costs will be included within the cost report as per their value in the contract. When priced the value should be omitted and valued as per actual costs.
What do you mean by an effective change control procedure?
A clear and effective communication system which is able to manage efficient change on a project.
This is performed in various ways on my projects, the first being regular cost reporting, keeping project stakeholders up to date with any recent changes/variations.
I also now deal with electronic control systems, such as Asite and CEMAR, where project changes are raised and communicated to all project stakeholders.
Why are change control procedures important?
Change control procedures are important to keep the client up to date on the financial position. This will inform them whether we are on budget, or whether there may be a requirement for additional funding.
Can you talk me through the change control procedure on one of your projects?
On the Toby Carvery projects the client will advise of a change they would like to explore.
The CA will ask that the contractor provide a cost for the works.
Once they have provided a cost I will review the costs and advise whether they are appropriate.
If so, the CA will instruct the change for the contractor to proceed with the works.
Why is cashflow forecasting important?
Cash flow forecasting is important as it details the income and expenditure across a period and is used as a tool for predicting funding at that point in time.
How is a cash flow produced?
A cash flow is produced in one of two ways, depending on the stage of the project.
Pre contract I would use an S Curve formula, but post contract I would use the pricing document and the contractor’s programme.
Is cashflow monitored during a project? If the cashflow is different to the valuation, what does that indicate?
Cash flow is monitored on an ongoing basis throughout the project. If the cashflow is different to the valuation it could mean a few things, either we are ahead of programme or behind.
Ahead could be the result of acceleration or re sequencing of works, behind could be due to re sequencing or project variations. Adverse weather may have played a part.
What is ‘variation’?
A variation comes about due to an alteration or modification to the design, quantity or quality of the construction works.
A variation can refer to two things, a relevant matter or relevant event. These gives rise to loss and expense and EoT, respectively.
Have you ever heard of ‘S Curve’? What is the rationale behind? Is there any difference between cashflow curves between contractor’s own and projects?
An S Curve is typically seen on a construction project. It refers to the sequencing of works and how progress would be slower to begin with, followed by an exponential increase in spending during the middle of the project. At the end it would start to level off again.
Were the provisional sums on Project Zeta defined or undefined?
They were defined provisional sums. The contractor had made an allowance within their prelims and OH&P for the works.
How were the provisional sums on Project Zeta firmed up?
The provisional sums were firmed up as the project progressed. For example, the contractor submitted costs against the welfare unit and these costs were reviewed, with the original cost omitted and the revised cost included as a variation.
What was the role of the Employer’s Agent post contract?
- They were responsible for the following:
- Chair Project Meetings
- Review and approve design development
- Monitor project quality against ER’s
- Manage the delivery of the project against project programme
- Issue payment notices
- Implement the change management process
What did you include within your cost reports/financial statements on Wythenshawe Hospital?
- Front cover
- Contents
- Executive Summary
- Cost Summary
- Provisional Sums
- Contingency
- Variations
- Anticipated Variations
- Claims
- Forecasted Final Account
Are there any risks associated with provisional sums that you advised the client of on Project Zeta?
The risk associated with a provisional sum is that it is an estimate of cost and as such the value of the contract sum may increase or decrease when the work is priced.
If a undefined provisional sum had been used there may have been a concern that the contractor could claim additional time and expense. Although I advised that defined sums should be used to negate this.
